Being a beginner, you might not be aware of what exactly a credit card and its benefits are. Most people keep credit cards for emergency cash, but those people are not able to utilize the perks and benefits of that credit card, and all that goes to waste. We keep on using normal payment methods and keep having expenses and the bills are never-ending. The best feature of actually having a credit card is you get value back on every expense.
So, this means you make purchases, you get rewards, and you redeem those rewards according to your need. This is a process by which a common man can save a lot from expenses. It’s not exactly saving, but you get a return on your investment, no matter how small it is, at least it’s better than nothing.
Keeping in mind what are your basic needs, on which thing you spend the most of your money, and what expenses are recurring and what is not, is important so that you can choose the best-suited card for you. No credit card can be proven best for everybody because every individual has different needs to fulfil and every credit card is different from one another. The difference between these credit cards makes them the perfect fit for individuals.
But to get the card best suited for you, the most important thing is the details including the perks and fees related to the card. Applicants usually see the benefits of the credit card and do not consider the fee and charges to be applied to the transactions. This can make the user fall under the high-interest rates.
Understand The Fee and Charges Related to your Credit Card
It is nevertheless to say that whenever we buy anything we see the rate of the article, but when it comes to financial tools such as credit cards, we might choose a different way. People do not show much interest in the rates and charges applied on credit cards which can make them fall into deeper pits of debt.
To avoid such type of situation, try to gain knowledge about your credit card as much as you can. Doing so will not only make the picture clearer to you but it will also help you direct in the right way. Many fees are added to your outstanding amount which not many people know. The following are the types of fees that are charged by credit cards –
- Joining Or Annual fee – This fee is affiliated with almost every credit card. This is a joining fee that can be different from card to card, depending on the type of card it is and its features. This fee is usually determined by the card on the basis of what division it is going to serve. There are credit cards for every individual starting from the beginners or entry-level credit cards to premium and super-premium.
The better features one card has, the more it might cost. The fee can vary anywhere from Rs. 199 + taxes to even Rs. 1,20,000 + taxes or more depending on the card.
- Interest rates – These rates are something that can make your pockets empty and needs to be checked from the day 1 you start spending money from your credit card. The interest rate or finance charges are the rates that are set by the bank and can differ from person to person and card to card.
These are the interest rates that an applicant has to pay on the amount they are using. Obviously not in every payment but an explanatory example can be at times when the person forgets or does not make the payments on time. This amount starts getting added to the actual debt. This fee can range anywhere from 1.5% per month to 3.5% per month and there can be cases where the fee is more with different banks.
- Forex markup fee – This fee is charged upon making international transactions. Any transaction made in two different currencies is charged a Forex fee. This is called Foreign Exchange markup fee and is levied on every transaction made in different countries as well.
Such as you are an Indian and use Indian Rupee as your currency and you are traveling abroad in a country like the USA where the standard money is USD. Here two currencies are in place, so whenever you make a transaction from your home country card, you are using INR to convert into USD and then pay for your expenses. This fee can lie anywhere from 1.99% of the transacted amount to 3.5%.
- Cash advance fee – This fee is the one which people are not aware of, or you can say that it is a hidden fee. This is a fee that is charged directly when you withdraw cash with the help of your Credit Card. The cash advance you make is charged with a partial amount of money as per the bank’s guidelines. This amount depends on the bank’s guidelines and can even be different in the case of different credit cards.
There can be some added fees and charges which can apply to the cards as per the bank’s guidelines following RBI. These above-mentioned types of fees are the basic fee charged by the banks regularly. These fees and charges can vary from one to another depending on the card as well as their providers.
For beginners, it is a tough task to understand credit cards, their fee structure, and their charges. This is because there are various cards present in the market by different providers which makes it difficult for the user to understand a lot of things. But the most important fees and charges to look at are already mentioned. There may be differences between the charges of cards but that completely depends on the type of card and perks it has.
In this scenario, it is important to know your expenses and pattern of spending more than anything because it will help you track your spending. If you are able to understand your credit card very well then managing your expenses will be much easier.